Sunday, November 2, 2014

Derivative strength

Kindly bear with me on this brief introductory paragraph. In finance, a derivative is a product usually a financial asset, which on its own is valueless but obtains or derives its value from another underlying asset which carries the value. An example is owning the right to buy shares (long call option) in a business. The gains or losses you make on this right will depend on the price of the share on the market. The higher the company's share price, the more money you make on the option you own as shown in the diagram on the right. A more simpler definition of a derivative is something which is based on another source. A more simplified example of the concept is money which can be backed by gold or silver held by a Central Bank or issuing authority and also called commodity money. Money today is mostly fiat money which is has its value backed by government regulation or law giving it legal tender status, although commodity money is also still used.

 Source: Federal Reserve Website
 As of September 2014, a $100 bill costs about 13 cents to make, but carries a value of $100 with a sliding scale for other notes as shown in the table on the left. The paper in your hand buys you goods worth $100 and derives its exchange value from both legislation and collateral in form of government securities. Moving on swiftly from the financial stuff without losing you along the way, imagine being more valuable because you have a backing for your value, or being more powerful and stronger because you have a backup source like a standby power supply for those moments when your own power or value is low or down. How many times have you been surprised by the value someone adds to you after you have initially written them off by outward appearance? It is because that person has packed up value backing her up, which makes it possible for her to unleash value. You can also have a source of value and strength, which lifts you up and backs you up when you are down and out. I believe it is possible to have what I will call derivative strength.

Derivative strength? 
Most people call it confidence, but I thought I would twist it around and call it derivative strength. The departure point for this name being that life can be so draining sometimes and your own strength is easily depleted to the extent that you even feel as if you are of no value around others. It is in those moments when you need strength derived from various back up sources or from something outside yourself. During an argument, if you have strong background on a matter you can confidently stand and defend your stance based on having either experienced or read up a reputable source that supports your position, and you can draw on that knowledge in need no matter how many people are against your view. Remember the phrase "I got your back"? Those who have had a notorious sibling within the same school will  immediately understand, and this is where derivative strength comes in. When you can step on some toes and big brother will come in, back you up and make sure you remain safe. When you can "get away with murder" and have others asking who you think you are, and those in the know just whisper that this kid must be left alone and cannot be messed with. In another sense, one can have a back up which can  be the source of strength to go through a difficult patch in life. Strength or hope that makes you look trouble in the face and still laugh through it all. When life challenges seem greater than what one can reasonably take on and survive, that is when you need to draw on your derivative strength from another source, not necessarily from within yourself.

Image credit

Strength from what you have seen, heard or been indoctrinated in through your relationships, experiences, religion and from the HOPE of knowing that nothing lasts forever including challenges, but in order to get to that point where you have derivative strength, you need to have put in a lot of work into that backup source. Unlike money which costs less than the value it carries, derivative strength costs a lot for it to sustain you when you need it. At the risk of mentioning the obvious, when someone needs take part in a physical activity requiring strength, there is both physical and mental preparation that occurs to ensure that one can handle the strain required to achieve the fete. There is discipline, an eating plan and rigorous training that goes with preparing for that event so that when the time comes, there is enough mental and physical power built up and stored to carry out the challenge. Solar power works on the availability of sunshine first, which is then converted and stored into energy for use when required. Antarctica has 6 months of winter and a similar period of summer, and it is during summer that solar energy harnessing is feasible and then stored up for the winter. In much the same way, you need to have taken in some 'sun' in the form of seminars, lessons learnt, counsel, knowledge, advice, wise words and other pieces of solid backup so that in need of energy, you can draw on them and survive the cold winter. Life has very cold winters which are guaranteed but you don't get your money back if they don't come for anyone to face during a lifetime. It is therefore imperative to work on your backup sources and ensure that you have derivative strength for that day when you will need it. What are your thoughts on having derivative strength and how do you think you can build up your own sources of strength which you can tap into when you are down on your own strength and need underlying strength to boost you for the day, week, month, year or even the rest of your life?